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Dynamic Econometric Models of Manitoba Crop Production and Hypothetical Production Impacts for CAIS

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Author Info

  • Coyle, Barry T.
  • Wei, Ran
  • Rude, James

Abstract

This study analyzes the impact of the Canadian Agriculture Income Stabilization (CAIS)program. The study begins with a specification of dynamic crop production that decomposes static short run crop acreage allocation decisions and dynamic crop yield affects. The modelling framework accommodates risk aversion, price uncertainty, and applies recent aggregation theory to aggregate weather data. Using this framework an analytical model of the impacts of CAIS on crop production is developed. Hypothetical impacts of are simulated using an aggregate Manitoba data set. The results show that CAIS has a substantial impact on the shadow prices of both inputs and outputs. These shadow price effects resulted in a 4 percent increase in long run wheat and barley yields and a 2 percent increase for canola. CAIS has a small impact on nominal wealth but the impacts depend on the properties of producers’ risk preferences. With constant relative risk aversion there is a wealth effect which in turn affects production decisions.

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File URL: http://purl.umn.edu/46630
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Bibliographic Info

Paper provided by Canadian Agricultural Trade Policy Research Network in its series Working Papers with number 46630.

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Date of creation: Jul 2008
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Handle: RePEc:ags:catpwp:46630

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Related research

Keywords: Canada; CAIS; risk; crop; production; Agricultural and Food Policy; International Relations/Trade; Production Economics; Risk and Uncertainty;

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References

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  1. Hennessy, David A., 1998. "The Production Effects of Agricultural Income Support Policies Under Uncertainty," Staff General Research Papers 1207, Iowa State University, Department of Economics.
  2. James Rude, 2000. "An Examination of Nearly Green Programs: Case Study for Canada," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(3), pages 755-761.
  3. Hennessy, David A. & Babcock, Bruce A. & Hayes, Dermot J., 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," Staff General Research Papers 1100, Iowa State University, Department of Economics.
  4. Babcock, Bruce A. & Hennessy, David A., 1996. "Input Demand Under Yield and Revenue Insurance," Staff General Research Papers 794, Iowa State University, Department of Economics.
  5. Robert G. Chambers & John Quiggin, 2001. "Decomposing Input Adjustments under Price and Production Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 20-34.
  6. Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
  7. Paolo Sckokai & Daniele Moro, 2006. "Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 43-56.
  8. Joseph W. Glauber, 2004. "Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1179-1195.
  9. John C. Quiggin & Giannis Karagiannis & J. Stanton, 1993. "Crop Insurance And Crop Production: An Empirical Study Of Moral Hazard And Adverse Selection," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 37(2), pages 95-113, 08.
  10. Mike Massow & Alfons Weersink, 1993. "Acreage Response to Government Stabilization Programs in Ontario," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 41(1), pages 13-26, 03.
  11. Beach, Charles M & MacKinnon, James G, 1978. "A Maximum Likelihood Procedure for Regression with Autocorrelated Errors," Econometrica, Econometric Society, vol. 46(1), pages 51-58, January.
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Cited by:
  1. Haile, Mekbib G. & Kalkuhl, Matthias & von Braun, Joachim, 2013. "Short-term global crop acreage response to international food prices and implications of volatility," Discussion Papers 145308, University of Bonn, Center for Development Research (ZEF).
  2. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "Inter-and intra-annual global crop acreage response to prices and price risk," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149695, Agricultural and Applied Economics Association.

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